Germany - Public finance

The 1967 Law for the Promotion of Economic Stability and Growth requires
the federal and state governments to orient their budgets to the main
economic policy objectives of price stability, high employment, balanced
foreign trade, and steady commensurate growth. The Financial Planning
Council, formed in 1968, coordinates the federal government, states,
municipalities, and the Bundesbank in setting public budgets. Income,
corporate turnover, mineral oil, and trade taxes account for more than
80% of all tax revenue, with the federal government controlling just
under half of it. Since the 1960s, social insurance provisions have
accounted for the largest share of federal expenditures.

Germany's reunification in 1990 raised special problems with
regard to economic and financial assimilation. The Unification Treaty
provided that the new states should be incorporated in the financial
system established by the Basic Law as much as possible from the onset.
Therefore, since 1991, the new states have basically been subject to the
same regulations with regard to budgetary management and tax
distribution as the western states. A "German Unity Fund"
was initiated to provide financial support for the new states (and their
municipalities); it is jointly financed by the western states, with most
of the money being raised in the capital market.

The US Central Intelligence Agency (CIA) estimates that in 2001
Germany's central government took in revenues of approximately
$802 billion and had expenditures of $825 billion. Overall, the
government registered a deficit of approximately $23 billion.

The following table shows an itemized breakdown of government revenues
and expenditures. The percentages were calculated from data reported by
the International Monetary Fund. The dollar amounts (millions) are based
on the CIA estimates provided above.

REVENUE AND GRANTS

100.0%

802,000

Tax revenue

83.2%

667,095

Non-tax revenue

15.9%

127,157

Capital revenue

0.4%

3,512

Grants

0.5%

4,237

EXPENDITURES

100.0%

825,000

General public services

2.7%

22,162

Defense

3.9%

32,111

Public order and safety

0.3%

2,842

Education

0.5%

4,481

Health

18.9%

155,861

Social security

50.0%

412,765

Housing and community amenities

0.5%

3,842

Recreation, cultural, and religious affairs

0.1%

898

Economic affairs and services

7.4%

60,828

Other expenditures

8.6%

70,627

Interest payments

7.1%

58,584

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